Company remains focused on strategic imperatives despite persistent inflation and interest rate-driven headwinds
LendingTree, Inc. the nation’s leading online financial services marketplace, announced revised guidance for the current quarter.
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“Our variable marketing model continues to serve us well as difficult economic forces have persisted, and in many instances worsened, so far this year. Despite rapid increases in interest rates, rampant consumer price inflation, and looming recession fears presenting persistent headwinds for some of our operating segments, our diversified business model and strong balance sheet allow us to continue to strengthen our competitive position while navigating shorter-term macro driven challenges,” said Doug Lebda, Chairman and CEO. “This year we remain focused on our key strategic initiatives to create even more useful, usable, and desirable experiences for consumers that come to LendingTree for their borrowing and insurance needs. We are happy with the pace of execution on these plans and expect the positive impact from them to begin to manifest in the quarters ahead.”
Chief Financial Officer, Trent Ziegler added, “The challenging interest rate environment that progressed through this quarter combined with annual inflation persistently running above 8% has presented additional challenges for many of our mortgage lending and insurance partners. We have seen the most significant impact in our Home segment as mortgage rates have nearly doubled over the last six months, causing a sharp decline in refinance volumes and more recent pressure on purchase activity. Although our Insurance segment continues to rebound from the trough in 4Q 2021, the recovery has been slower than expected as demand from our carrier partners remains volatile as premium increases continue to chase inflation. On a positive note, our Consumer segment continues to perform quite well, as we expect approximately 40% growth in the quarter. Annual guidance provided in our 1Q earnings announcement is under review, and we intend to provide a revised outlook when we announce formal 2Q results next month. Despite near-term headwinds, our balance sheet remains incredibly solid, we expect continued positive cash flow generation, and we continue to operate from a position of strength.”
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2Q 2022 Preliminary Results
- Revenue is now anticipated in the range of $259 – $264 million vs prior range of $283 – $293 million.
- Variable marketing margin is now anticipated to be $88 – $92 million vs prior range of $100 – $106 million.
- Adjusted EBITDA is now anticipated to be in the range of $26 – $29 million vs prior range of $35 – $40 million.
LendingTree is not able to provide a reconciliation of projected variable marketing margin or adjusted EBITDA to the most directly comparable expected GAAP results due to the unknown effect, timing and potential significance of the effects of legal matters and tax considerations. Expenses associated with legal matters and tax considerations have in the past, and may in the future, significantly affect GAAP results in a particular period.
LendingTree’s Principles of Financial Reporting
LendingTree reports variable marketing margin and Earnings Before Interest, Taxes, Depreciation and Amortization, as adjusted for certain items discussed below (“Adjusted EBITDA”) as non-GAAP measures supplemental to GAAP.
Variable marketing margin is defined as revenue less variable marketing expense. Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on the Company’s consolidated statements of operations and consolidated income. Variable marketing margin is a measure of the operating efficiency of the Company’s operating model, measuring revenue after subtracting variable marketing and advertising costs that directly influence revenue. The Company’s operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and the Company’s proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. Variable marketing margin is a primary metric by which the Company measures the effectiveness of its marketing efforts.
EBITDA is defined as net income from continuing operations excluding interest, income taxes, amortization of intangibles and depreciation. Adjusted EBITDA is defined as EBITDA excluding (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments, (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), and (8) one-time items. Adjusted EBITDA is a primary metric by which LendingTree evaluates the operating performance of its businesses, on which its marketing expenditures and internal budgets are based and by which management and many employees are compensated in most years.
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